Luk Fook has reported a 27.2% decline in revenue for the six months ending 30 September 2024, amounting to HKD 5.45 billion, a decline mainly attributed to elevated gold prices affecting consumer demand.
The gross profit margin increased by 4.9 percentage points to 32.7%, resulting in a gross profit of HKD 1.78 billion.
Impact of Gold Hedging and Net Profit
Gold hedging losses during the period reached HKD 230 million, marking a significant reversal from the HKD 55 million gain recorded in the same period last year. Operating profit dropped by 53% to HKD 536 million, with the operating profit margin decreasing to 9.8%. Net profit fell by 55.7% year-on-year to HKD 417 million. When excluding gold hedging losses, the adjusted net profit stood at HKD 647 million, reflecting a 27.1% decrease.
Store Closures and Current Footprint
The company reduced its store count by 175 locations across China and Hong Kong during the first half of the fiscal year. This reduction represents a 5% decrease, bringing the total number of outlets to 3,408.
Regional Sales Performance
Sales in Hong Kong, Macau, and overseas markets fell 27% year-on-year to HKD 3.51 billion. Same-store sales in these regions declined by 35%, with gold and platinum products down 37% and fixed-price jewellery, including diamonds, falling 30%. Mainland China sales also declined by 27%, totalling HKD 1.94 billion.
Outlook and Strategic Focus
Luk Fook reported improvements in same-store sales since September, signalling a gradual recovery in the third fiscal quarter. The company expects gold product sales to normalise as consumers adapt to higher prices. To address weak demand for diamond products, Luk Fook will focus on promoting non-diamond fixed-price jewellery.
Implications for the Jewellery Industry
Luk Fook’s performance highlights the influence of gold price fluctuations on jewellery sales. The shift toward promoting non-diamond fixed-price jewellery reflects a response to current market conditions. Jewellers may need to explore diversification strategies and monitor commodity trends to address changing consumer behaviour.
